Iraq’s foreign currency reserves have risen to close to $58 billion and are expected to increase further thanks to a rise in oil revenues, a central bank official said.

Mudher Kasim, the deputy central bank governor, said higher global oil prices had boosted Iraq’s federal revenue and could result in a budget surplus for 2011.

“(The amount of reserves) has gradually increased since the beginning of last year, when it was $40 billion. Now it is close to $58 billion,” Kasim said.

Last October, Kasim had put reserves at around $50 billion, with 45 per cent held in dollars, 45 per cent in euros and 10 per cent mainly in gold and British pounds.

Iraqi federal revenue depends mainly on oil, and higher oil prices have helped the country earn billions of dollars this year.

Iraq earned $34.1 billion in oil revenue, an increase of $8.7 billion, or 34 per cent, over budgeted revenue, in the first five months of this year, Deputy Prime Minister Hussain Al-Shahristani said in June.

Iraq’s parliament approved an $82.6 billion budget for 2011 in February, based on an average oil price of $76.50 per barrel and 2.2 million barrels per day in crude exports.

If international oil prices remain at over $100 this year, Iraq would see a 2011 budget surplus of 15 per cent, Kasim said.

While the country’s current year deficit had been projected at $13.4 billion, officials have said the shortfall will be eliminated if world oil prices remain at current high levels.

The deputy governor said inflation — which quickened to 7.1 per cent in July from 6.4 per cent in June — was under control but being monitored carefully.

Iraq, battered by years of war and economic sanctions, depends mainly on imports for most goods, including food and building materials.

“If prices continue to increase and the inflation rate approaches two digits, monetary policy tools will be strongly activated to fight inflation,” he said.

Kasim said a plan to take off three zeroes from Iraq’s currency to simplify financial transactions was awaiting parliamentary approval and said the government should approve the project sooner rather than later. (Source: www.yallafinance.com)